NEW DELHI: Minister of State in the Prime Minister's Office, Prithviraj Chavan on Wednesday called for the de-politicisation of fixing of oil prices, the appointment of a regulator and mooted dual pricing for domestic Liquefied Petroleum Gas (LPG), questioning the rationale behind giving subsidy to the affluent sections of society.

"The subsidy of Rs. 150 a cylinder should not be availed of by the affluent. There is a case for better targeting of LPG subsidy. As LPG retail business is more organised than kerosene, it is possible to opt for targeted subsidy in domestic LPG," Mr. Chavan said at a special session on `Special Track on the Challenge in Retail' organised as a part of Petrotech-2007. The Minister also proposed a fixed subsidy on LPG cylinder with the pricing linked to international price parity. The public sector oil companies face under recoveries of Rs. 20,000 crore annually by selling LPG below cost. The price of LPG has been maintained at the 2004 level.

De-politicise pricing

Mr. Chavan underlined the need to de-politicise the fixing of oil prices and said a regulator, in a transparent manner and after public hearings, could decide on the price of petroleum products, issue of subsidy and quantum of cross subsidy. "The decision to revise petroleum products prices should not become a politically sensitive issue. Why should the issue be referred to the Cabinet?" Mr. Chavan asked.

He said the price differential between kerosene and the subsidised price at which it is provided to consumers results in its diversion for adulteration in diesel. "There is an economic cost in repairs of engines and the failure to provide kitchen fuel to the poor," he pointed out and urged the industry to utilise research and development to prevent such market distortions.

Space utilisation

At the same time, he also asked the oil companies to utilise to the optimum level the space allotted for petrol pumps for other retail activities. He said consistent efforts should be made to negotiate the rules governing explosives as they barred certain constructions in the vicinity of petrol outlets. "Utilise petrol pumps for as many services as possible including retail activities so that they emerge as hubs for a large number of consumer related services," he said.

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